Bill Johnson

Doing a Loan Modification doesn’t always work. For the overwhelming number of Homeowners,  Banks are refusing to lower the principle balance and many Homeowners become engulfed in a circle of confusion. Others Homeowners, thinking that the bank is working to assist them, wake up to find that the home is being foreclosed on without notice. Also important, Homeowners who are getting loan modifications are finding that the terms of the revised loan are just as difficult to live with as the original loan.

Frustration, confusion and total depression is what many people are feeling right now while trying to do a Loan Modification. There is an answer; keeping your dignity while removing excess stress can be accomplished by doing a Pre-Foreclosure Sale or Short Sale.

Consider the following to determine whether you may qualify for a Short Sale.

The Home's Market Value Has Dropped:
Current comparable sales in the same neighborhood must substantiate that the property value is less than the unpaid mortgage balance.  This unpaid balance may include a prepayment penalty.

The Mortgage Is In or Near Default Status:
In the past, banks would not consider a Short Sale if the payments were current, but that is no longer the case. Realizing that other factors contribute to a potential
default, many banks are now willing to consider a short sale pay off.

Seller Has Fallen on Hard Times:

1. Adjusting Rates
2. Unemployment or Job transfer
3. Divorce
4. medical Emergency / Sudden Illness
5. Death
6. Decrease Income

The Seller Has No Assets:

The bank may request a copy of the Seller’s tax returns and financial statement.
If the bank discovers assets, the bank may not grant the short sale because the Seller has the ability to pay the shortfall difference. Sellers with assets may still be granted a short sale but could be required to pay back the shortfall.

For example, if the Seller has savings, owns other real estate, stocks, bonds or even IRA accounts, the bank will most likely determine that the Seller has assets:  however, the bank may discount the deficiency. In a Short Sale, the Seller cannot make a profit.

Share your story; what has been your experience with Loan Modification and Home Retention?

Indymac Onewest Bank and the FDIC from Shane Barker on Vimeo.